Export Potential of Indian Ceramic Industry
Total Page:16
File Type:pdf, Size:1020Kb
Contents Sr. No. Topic Page No. 1 Preface 1 2 Executive Summary 2 3 Introduction 5 4 Global Scenario 6 5 Indian Ceramic Tile Industry 9 6 4Ps of Marketing for Indian Ceramic Industry… 13 7 India’s Trade Performance for Ceramic Products 15 8 Analysis of India’s export potential 17 9 Some Recent Issues 21 10 Government Support 23 11 Problems faced by Indian Ceramic Industry 25 12 Industry Voices… 26 13 Conclusion 27 14 Reference… 28 Preface Every month we read news on capacity expansion of many ceramic companies. This is obvious because India is the 6th largest consumer of ceramic tiles and the 8th largest manufacturer of this product. This report entails an overview of the Indian ceramic industry with more emphasis on the export potential of ceramics, the challenges faced by small players at markets overseas and support of government in this regard. The report is result of exhaustive visits of the ceramic tiles and sanitary ware units of both Morbi and Himmatnagar. While making this report I also met various Associations of this industry. They gave me fare view of how they give a platform to the domestic manufacturers to stand tall against the stiff price war of China. I have given more emphasis to ceramic tiles because of the fact that they constitute a big chunk of the total exports. Apart from tiles Indian sanitary wares has also got fame across the borders. The kudos to furnish this report goes to various entrepreneurs of Gujarat, who have given me their precious time to accomplish the missing blocks of information in this work. When I started, I was once disappointed because no one has written about this wealth creating industry of Gujarat. But bit by bit all information was dug out from various industrial sources. 1 Executive Summary Introduction In India, ceramic tile industry emerged in the late 1950s, with H&R Johnson setting up its plant for manufacturing of wall tiles at Thane. Somany Pilkington entered the industry subsequently in 1960. After almost three decades in 1985, Spartek Ceramics entered the ceramic tiles industry with unglazed ceramic floor tiles. The lucrative and flourishing floor tiles industry further attracted many others. At present around 16 industrial units are operating in the organized sector and more than 250 units in the unorganized sector with total production capacity of 175 mn sq. mt. per annum. Ceramic industry can be classified into three segments --- wall tiles segment, floor tile segment and vitrified & porcelain tile segment. Presently in India the market share of these segments are 42%, 46% and 12% respectively. The organized sector is characterized by the existence of a few large players e.g., H&R Johnson, Kajaria Ceramics, SPL, Spartek and Murudeshwar Ceramics to name a few. In the domestic market of ceramic market, H&R Johnson is the leader followed by Kajaria Ceramics with market shares of 21% and 13% respectively. Global Scenario World production of ceramic tiles was 5904 million sq. mt. in 2002. China was the largest producer with a total production of 2100 million sq. mt. Spain and Italy were other major producers with production of 651 million sq. mt. and 606 million sq. mt. respectively. India ranks at 8th position with production of 150 million sq. mt., which is around 2.5% of global production. However, in terms of production growth, India ranked 2nd with a CAGR of 24.35%. Total world consumption is 5426 million sq. mt., of which 25.5% is traded globally and the rest being sold domestically. China is the largest consumer followed by Brazil and Spain. India ranked 6th in terms of consumption volume, but has highest consumption growth rate of 22.26% per annum. 2 In terms of exports, Italy ranked 1st in the world. In 2002 Italy exported 436 million sq.mt. of ceramic tiles, this is 8.10% of world consumption. Spain and China were the 2nd and 3rd largest exporters. In recent years China's export has increased at a much faster pace than others. In terms of imports, USA was the largest importer with an import volume of 189 mn. Sq.mt, which is around 13.6% of global import. Germany and France are the two other major importers of ceramic tiles. USA, Germany and France jointly imports around 30% of total world imports. Indian Tile Industry The ceramic tiles industry in India emerged since 1950s. The industry is characterized by few players in the organized sector and a large number of players in the unorganized segment. The industry holds a share of 2.5% in global production. Though India holds a minuscule share of 0.77% of global trade of ceramic products in 2002. India majorly exported to Saudi Arabia, UK and UAE and imported from China and Germany. India's Opportunities Four different product groups are identified as items of high demand for exports. Product Group Markets Potential markets Glazed ceramic tiles Qatar, Saudi Arabia, Sri Germany, Lanka France Ceramic household UK UK articles Ornamental ceramic USA USA products Unglazed ceramic tiles UAE, Saudi Arabia, UK, Sri UK, Germany Lanka Some Concerns For some time now Indian ceramic tile manufacturers are besieged with the problem of low margin and falling profitability. One of the reasons 3 behind this is the dumping of vitrified tiles into Indian market by countries such as China, Indonesia, Sri Lanka, Malaysia and UAE. Last year nearly Rs. 100 crore worth of imported tiles were dumped into India. This problem has recently been intensified because of the China's entry into the Bangkok agreement, which was developed with a view to promote free trade among South East Asian countries. Entry of China in the Bangkok agreement has resulted in large import from China, as under this agreement Chinese goods attract a duty of 10% as against 15% duty on import from other countries. This seems to affect the domestic producers severely. Another major problem for the industry is the rising costs of manufacturing due to increase in prices of raw materials such as zirconium and titanium. The petroleum price hike has also affected the industry, though in an indirect manner. Because of the substantial bulk of the material, ceramic tile accrues very high freight element. Rise in the petroleum prices increases this cost substantially. On the other way because of the import competition from China, domestic tile manufacturers cannot increase their price. This directly reduces their sales and profitability further. Future Outlook Prospect of ceramic industry heavily depends on construction activities. In India the construction sector is expected to do well mainly due to fiscal incentives given to the infrastructure development. Apart from this, the housing sector is also expected to grow because of low interest rates on housing loans. Thus, the future prospect of the Indian ceramic industry seems to be bright. 4 Introduction The word ceramic derives its name from the Greek word keramos, meaning "pottery". The word was used to refer to a product obtained through the action of fire upon earthy materials. The ceramic industry in India is about 100 years old and forms a sizeable industrial base at present. Ceramic tiles are manufactured both in large and small sectors with wide variance in type, size and standards. There are 27 glass and ceramic items for which the small scale sector has exclusive production right. Tableware and allied items namely, dinner sets, tea sets, cups and saucers, jars in stoneware, semi-vitreous ware and earthen ware are reserved for the SSI sector. State of the art ceramic goods are manufactured in the country and the technology adopted by the Indian ceramic industry is of international standard. The ceramic sector mainly consists of mainly three sub sectors, namely, ceramic tiles, sanitary ware and crockery items. A brief description of each of these sub-sectors is presented below. Ceramic tiles sector. There are 16 units in the organized sector and 250 units in the unorganized sector manufacturing ceramic wall tiles, floor tiles and vitrified tiles. The production of organized sector is 85 million square metre per annum. While the production of the unorganized sector is 70 million square metre per annum. India accounts for nearly 2.5% of the world production. The domestic ceramic tile industry is growing at a rate of 8% per annum. Estimated size of the ceramic industry is approx Rs. 3300 crore out of which the share of SSI sector is around Rs. 1200 crore. In India the per capita ceramic tile consumption is 0.09 sq.mt.p.a. as compared to 1.2sq.mt. in China and 5 sq.mt. in European countries. Its demand is expected to increase with the growth in the housing sector. Indian tiles are competitive in the international market. They are being exported to east and west Asian countries. 5 Sanitary ware. Sanitary ware is manufactured both in large and small sectors with wide variance in type, range, quality and standard. This industry has been growing by around 5% per annum during the last two years. Sanitary ware items are presently being exported to East and West Asia, Africa, Europe and Canada. Pottery. Pottery ware such as crockery and tableware is produced both in organized and unorganized sectors. There are 16 units in the organized sector with a total installed capacity of 43,000 tonnes per annum. Bone china crockery ware is being imported from Bangladesh and Sri Lanka in view of the better availability of raw material there. Among the three segments of ceramic products mentioned above, the tile segment is the largest of all. The rest of my report will concentrate on the present status of ceramic tile industry and some important recent issues.